Kencana Agri

Kencana Agri: only broke even in 1Q13, below expectations. Revenue +15% yoy to US$89.5m, as the group’s FFB and CPO pdtn increased by 12% and 4% to 91k mt and 26k mt respectively, yoy, boosted by growth in the matured plantation area and improved maturity profile of trees. However, net profit collapsed 95% to US$0.1m, as gross margins declined from 12.1% to 7.1%, on the back of lower ASP of CPO ASP, which fell from US$922 to US$691 per mt, and higher interest expense. Mgt notes the present uncertainties in the global economy is likely to affect the demand and prices of oil seed pdts and CPO; believes CPO px is likely to remain weak in the near term. Nevertheless the group will have more mature trees coming into pdtn which will result in higher FFB and CPO pdtn. P/E is less relevant at this point. The stock trades at 1.3x P/B. UOBK maintains Sell with TP $0.32 (based on 11x FY14e P/E).